Drawn from a larger paper on geographical isolation, these pages present a review of literature pertaining to geographical isolation factors. The inclusion of a geographical isolation factor in a state's distribution formula for foundation aid is a mechanism for providing additional revenue to small schools or school districts that, because of geographical location, cannot be consolidated into more efficient units. First, the paper develops a rationale for such factors by briefly examining the literature dealing with the problems facing small schools. The major problem examined is that of high cost of operation stemming from low student-teacher ratios, increased transportation costs, and fixed costs that do not decrease with school size. Other problems include inability to offer a broad curriculum, inability to attract a well-qualified staff, and inefficiency. Possible methods suggested for dealing with such problems include interdistrict cooperation, formation or expansion of intermediate regional education agencies, increased state aid, and school district consolidation. Next, a review of the criteria to be included in the formulation of geographical isolation factors is presented, including maximum size that such a school may have and a definition of isolation. Finally, methods for apportioning supplemental revenues to geographically isolated schools are reviewed. (Author/JM)